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Vendors have to comply with U.S. search warrants even if the data in question is physically stored outside the country.

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In a recent case, U.S. Magistrate Judge James Francis has ruled that cloud computing service providers must turn over data sought with U.S. search warrants, even if that data is physically stored on servers located in other countries. The case was brought by Microsoft, which had challenged a U.S. search warrant on the grounds that the data in question was stored overseas.

Obviously, the ruling could have huge implications for cloud computing vendors. Many customers in Europe are already skittish about using U.S. providers in the wake of the recent NSA spying allegations. Industry watchers say the decision could spur many enterprises to choose to do business with European cloud computing vendors instead of those headquartered in the U.S.